market entry using country-of-origin intelligence in an emerging market. journal o
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Citation: Khan, Hina and Bamber, David (2007) Market entry using country-of-origin intelligence in an emerging market. Journal of Small Business and Enterprise Development, 14 (1). pp. 22-35. ISSN 1462-6004
Published by: Emerald
URL: http://dx.doi.org/10.1108/14626000710727863 <http://dx.doi.org/10.1108/14626000710727863>
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MARKET ENTRY USING COUNTRY-OF-ORIGIN INTELLIGENCE IN AN
EMERGING MARKET
Dr Hina KhanSenior Lecturer in MarketingNewcastle Business School
Northumbria UniversityNewcastle Upon Tyne
Email: [email protected]
and
Dr David BamberSenior Lecturer in Marketing
Hope Business SchoolLiverpool Hope University
LiverpoolEmail: [email protected]
2
MARKET ENTRY USING COUNTRY-OF-ORIGIN INTELLIGENCE IN AN
EMERGING MARKET
AbstractPurpose - The aim of the research is to explore country of origin (COO) effectsamong Pakistani elite consumers and to use that knowledge as an intelligence basefor SMEs considering entry into Pakistan.Design/methodology/approach – The literature concerning COO effects is presentedand a principle component analysis is conducted using with an elite Pakistani sampleusing a COO Likert type style scale that was previously used by Lascu and Babb(1995) in Uzbekistan and Poland.Findings - Four components were identified that correspond with consumersperceptions of produce attributes. The elite segment of Pakistan perceives COOimage, product quality and luxurious image of product and price as distinct attributeswhen making a purchasing decision. This study provides a basis for SMEs to gatherfurther detailed intelligence with regards to consumer perceptions of products andpotential demand in Pakistan.Research limitations - It will difficult to predict to which other foreign market theseresults will be applicable to, due to different market structures, buying power,cultures, attitudes toward the product and lifestyle.Practical implications - The paper indicates a strategy that SMEs could adopt toenter the emerging market of Pakistan. Targeting the niche market of elite consumerswho have strong buying power could prime the economy for future growth. BothSMEs within and outside Pakistan could take up strategies that use appropriate COOimage, provided that appropriate marketing research is undertaken that producesintelligence both regarding COO image of the SMEs products and perceptions ofthose products’ attributes in the target market.Originality/value of paper - The study explores components within a COO Likerttype questionnaire with reference to an elite managerial and professional consumergroup in the under researched market of Pakistan. It is argued that SMEs can use theknowledge gained as a basis for entry to new country markets.Keywords Elite consumer behaviour, country of origin, emerging market, Pakistan,Strategy, SMEPaper type Conceptual and Research paper
INTRODUCTION
This paper investigates the country of origin (COO) effects among Pakistani elite
consumers and proposes that the COO knowledge can act as an intelligence base for
SMEs considering entry into emergent markets, such as Pakistan. After comparing
empirical research conducted with an elite Pakistani sample with earlier research
conducted in emergent Eastern European economies, there are indications that
consumers, with distinct profiles, perceive COO effects differently in divergent
markets. Although specific market intelligence will be required to place particular
products in a particular emergent market, it is argued that SMEs could profitably use
3
COO intelligence as a basis for entry to new country markets, rather than develop a
new and costly brand image.
BACKGROUND TO THE EMERGING PAKISTANI MARKET
Pakistan imports around $10 billion on commodities, even though, 34% of the
population is below the poverty line. The upper 10% of the population; the elite with
the highest income, contribute 30% to the nation’s internal spending. Pakistani
population is expected to increase to 350 million by the year 2025 and the country is
already the seventh most populous nation in the world and the fourth in Asia.
Although the country is poor, there will be growing opportunities for market
development and penetration targeted at the embryonic managerial and professional
elite that will form the country’s wealthier class in the near future. The future
managerial and professional class will be increasingly conditioned by globalisation
and are likely to be representative of the next generation of elite consumers. The
Pakistani market, although having a unique set of barriers to entry, represents a
market with good potential for growth. Indeed there is a growing micro and SME base
within Pakistan, which is part of the informal sector in Pakistan. According to Ercelan
et al (2005), the majority of employment in Pakistan is now within the micro and
SMEs. Notably, SMEs in Pakistan are classed as units employing between 10 and 100
staff. According to Omar (2005) “SMEs are the backbone of Pakistan’s economy.
They represent 90 per cent of all enterprises in the country, provide millions of jobs
and are an essential source for entrepreneurial spirit and innovation.” Importantly,
there are about 80,000 SMEs in the country, with these focus on trade and services.
Furthermore, the true significance of SMEs is much higher as the informal sector,
employing between 5 and 10 staff, needs to be accounted for. Thus in Pakistan, SMEs
account for 80% of urban jobs and 30% of the country’s gross domestic product
(ADB, 2003). Constantly, over the last decade, the Asian Development Fund (ADF)
has helped to reduce poverty and improve the quality of life for poor people
throughout Asia and the Pacific. Indeed since 1973, the ADF has been a major
instrument of concessional financing in support of equitable and sustainable
development for the region, and in more recent years has provided hundreds of
millions of dollars per annum to promote SME development (ADB, 2006). In
particular, the Asian Development Bank (ADB) has promoted the competitiveness
and profitability of Pakistani SMEs as a stimulus to economic growth, by providing
4
assistance packages in the form of loans and partial credit guarantees (PCG). Two
distinct opportunities exist concerning Pakistan and SMEs. Firstly, there are
opportunities to develop manufacturing SMEs in Pakistan rather than SMES in trade
or service sectors. Secondly, there are opportunities for manufacturing SMEs from
developed economies to enter the Pakistani market. A relatively narrow class band
with a socieconomic focus depicting the elite embryonic managerial professional class
warrants investigation as such a class is likely to prime future economic growth and
provide a stable base for domestic purchases within Pakistan. Then, although SMEs
from the developed world have a huge combined budget, individual SMEs have
limited resources, hence they need to consider entry to new niche markets. The elite
embryonic managerial professional class of Pakistan could represent such a niche.
INTRODUCING COUNTRY-OF-ORIGIN EFFECT
As international trade activity is becoming a vital part of world economy, it is even
more important to gauge consumers’ attitudes towards both domestic and foreign
products (Netemeyer et al., 1991). Many researchers in this area have focused on
what is called country of origin (COO) effects: examining how consumers perceive
products sourced from particular countries (Roth and Romeo, 1992). Despite claims
that the world is a “global village” empirical studies suggest that national stereotypes
continue to play an important role on “the mental maps” of modern consumers. A
comprehensive review of the COO effect literature is presented by Al-Sulaiti and
Baker (1998) covering many product categories from food to automobiles for
consumers located in Asia, Europe, North and South American countries, Australia
and New Zealand. However, research regarding COO effect on elite consumers’
perceptions of products remains scarce.
A review of COO phenomenon was conducted by Knight (1999) who notes that
Nagashima (1970) first wrote about the country of origin effect, defining COO effect
as “the picture, the reputation, the stereotype that businessmen and consumers attach
to products of a specific country.” COO image originates from variables and
demographics such as national characteristics, economic and political background,
history, and tradition, but Knight (1999) comments that Han (1989) Parameswaran
and Yaprak (1987) perceive country image as “reflecting consumers’ general
perceptions about the quality of products made in a particular country and the nature
5
of people from that country”. Furthermore, according to Han (1988) and
Papadopoulos et al. (1990) COO perceptions encompass cognitions, highlighting
particular product and marketing attributes and affect, concerning the country’s
consumers.
COUNTRY-OF-ORIGIN EFFECT AS PRODUCT CUE
Products have extrinsic and intrinsic cues (Cordel, 1992 and Bilkey and Nes, 1982);
intrinsic cues are tangible or physical characteristics, such as design or colour and
extrinsic cues are intangible product characteristics, such as warranty or brand name.
COO has been described as an extrinsic cue that is used by the consumer to evaluate a
product quality. Accordingly COO, acting as an extrinsic cue, has considerable effect
on consumer attitudes and the likelihood of product purchase (Nagashima, 1970,
Schooler, 1971 and Yaprak, 1978). The COO effect is also known as the “made in”
concept and has been described as the favourable or unfavourable influence a
product’s country of manufacture may have on consumers’ attitudes and decision
making (Bilkey and Nes, 1982 and Elliott and Cameron, 1994). Research has shown
that COO does influence the consumer’s decision to purchase; consumers from
developed nations prefer products from developed nations, for these consumers the
preference may include home-made products, as opposed to products from less
developed nations. On the other hand consumers from less developed nations
preferred products from developed nations, for these consumers the purchase
preference is also likely to be for products from developed nations (Ahmed and
d’Astous, 1996; Lantz and Loeb, 1996, Okechuku, 1994 and Bruning 1997). For
example, a study carried out by Kaynak et al. (2000) found that Bangladeshi
consumers were more willing to purchase products from developed nations than
product from developing countries. Consumers were willing to pay higher price for a
Philips tape recorder made in Austria than the one made in India, even though
manufactured by the same company and the quality of the product was also identical.
In particular, targeted advertising campaigns to promote home made products such as
“made in the USA” or “buy Canada” are effective in persuading consumers to buy
home made goods rather than foreign goods (Reierson, 1966, 1967 and Hong and
Wyer, 1989). Laroche and Mourali (2005) investigate the influence of country image
structure on consumer evaluations of foreign products and, citing Papadopoulos et al
(1993), indicate that perceptions of country of origin of a product have three
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components. Those components are cognitive, affective and conative. The cognitive
component includes beliefs about a country’s industrial and technological
development. The affective component concerns the sentimental reaction to a
country’s people. The conative component concerns the consumers’ desired level of
interaction with the country. Thus country image is multi-dimensional.
POTENTIAL MARKET STRATEGY
SMEs entering a new market could use COO at the introduction stage of product life
cycle (PLC) or to gain a quick entry method in the foreign market as suggested by
Niss (1996) as used by Danish companies abroad. However, such strategies could be
directly applicable for SMEs entering emerging economies. The importance of using
COO intelligence in the beginning of the PLC or as an market entry method is that it
allows the company to penetrate the market and position the product in a quicker way
than brand name strategy. As COO give the product an immediate identity in the
market whereas a product without or lacking COO linkage would achieve the
distinctive profile. The alternative strategy of developing a brand image would be
feasible but it requires a longer lead-time and more resources to develop. Niss (1996)
presents a caveat that companies must take into consideration that the national image
features contained in the COO image are suitable for the specific type of product and
the targeted national segments: this is the sort of intelligence is required regarding
COO importance amongst the target market. Thus intelligence about how the concept
is structured concerning the COO image with respect to various products attributes
such as expensive/luxuries and non-expensive products is required.
COO also serves as a cue to evaluate performance and specific product or service
attributes so that consumers infer product attributes based on their perceptions of
country stereotype and their experiences with products from that country (Bilkey and
Nes, 1982). In order to identify important consumer segments, vital for targeting
marketing strategies, Badri et al. (1995) recommend investigation of consumer
profiles defined through demographic variables (age, gender, education, and income).
They found significant differences in COO effect, but only in relation to products
from Italy and Taiwan. Brunning (1997) investigated the relationships between COO
effect, national loyalty, product choice and various demographic variables in
consumers from different provinces of Canada, but did not use this residence
7
information in the conjoint analysis of relationships. Zain and Yasin (1997)
investigated the relationship between education and COO and their findings showed
no significant relationship between education and COO, apparently contradicting
Delener (1995) and Zain and Yasin (1997), who found significant differences between
genders related to the COO effect. Although Al-Sulaiti and Baker (1998) do report
studies showing significant relationships between consumers’ perception of price and
COO they do not report any studies investigating consumer income and the COO
effect. Lascu and Babb (1995) found that Polish consumers gave less priority to COO
when purchasing inexpensive goods. Zain and Yasin (1997) revealed that Uzbek
consumers perceived products from advanced nations to be of higher quality than
developing countries. Zain and Yasin (1997) further discovered that consumers give
priority to COO when purchasing products that are new, expensive and have a high
risk of malfunctioning and the analysis of that questionnaire data produced three
factors; social assurers, security seekers and price vetters.
RESEARCH OBJECTIVES
SMEs entering a new market could use COO at the introduction stage of product life
cycle (PLC) or to gain a quick entry method in the foreign market, as suggested by
Niss (1996) as used by Danish companies abroad. Such strategies could be directly
applicable for SMEs entering emerging economies. The importance of using COO
intelligence in the beginning of the PLC or as an market entry method is that it allows
the company to penetrate the market and position the product in a way quicker than
using brand name strategy. COO gives the product an immediate identity in the
market, whereas a product lacking COO linkage is retarded in its achievement of a
distinctive profile. The alternative strategy of developing a brand image would be
feasible but this requires a longer lead-time and more resources. Niss (1996) presents
a caveat, when using COO image as an entry strategy, that companies must take this
into consideration the national image features contained in the COO image are
suitable for the specific type of product and the targeted national segments.
Intelligence regarding COO image importance amongst the target market is essential,
as is knowledge about the structuring of the COO image with respect to the product
attributes, such as price and function. So, the aim of this research is to investigate the
COO effects within elite consumers of Pakistan. Research linking COO with elite
consumers remain scarce and this intelligence will be useful for SMEs outside and
8
within Pakistan. Extensive manual inspection of the journals and electronic database
searches also failed to locate literature concerning COO effects in elite Pakistani
consumers. Furthermore, none of the ninety-nine studies reviewed by Al-Sulaiti and
Baker (1998) investigated the COO effect on consumers from Pakistan. We
investigate the component structure of a COO questionnaire, which was previously
used by Lascu and Babb, (1995) using a non-elite sample. Here we used the
questionnaire with an elite consumer sample, to investigate COO components
important to them. A secondary purpose of this study is to investigate the
relationships between demographic variables suggested by Badri et al. (1995)
(gender, age, course and income) and the COO effect for the elite consumers in an
emerging economy.
The objectives of the study were:
To investigate COO effects on Pakistani elite consumers’ perceptions of products
To identify components of COO effect that are important to elite consumers
To investigate the impact of demographics on those COO components
To provide an intelligence base for SMEs considering entry into Pakistan.
RESEARCH DESIGN AND METHOD
Studies by Lascu and Babb (1995) and Zain and Yasin (1997) used translated versions
of a thirteen item questionnaire for Polish and Uzbek consumers respectively. An
English version of Lascu and Babb’s (1995) questionnaire was used in this study and
contained the same thirteen COO Likert type items, using a five point scale
(5=strongly agree, 4=agree, 3=neither agree nor disagree, 2=disagree, 1=strongly
disagree). The questionnaire was administered to elite consumers, who would be
likely to purchase expensive and non-expensive products. Although short, this
questionnaire was used as it covered the breadth of constructs concerning the COO
phenomena and was used previously to analyse the emerging markets in other
countries. We decided to use the English version of the questionnaire so that the
results of analysis could be compared with previous results and locate social assurors,
security seekers and price vetters, the three components found by Zain and Yasin
(1997). A second part of the original questionnaire aimed to obtain demographic
information about the respondents; gender, age, education. A sample was selected to
9
represent elite consumers. Here respondents were undertaking either bachelors or
masters degrees in Business Administration, at the Institute of Business
Administration (IBA) sites of Karachi University in Sukkur and Karachi. The sample
contains a high proportion of people who are likely to become future managers and
rich consumers and so they represent the emerging elite segment. The English version
of the questionnaire, used previously by Zain and Yasin (1997) and Lascu and Babb
(1995), was presented to the respondents and explained, in English by the researcher.
All the respondents were fluent in both Urdu and English. The purpose of the study
was explained and the questionnaires administered to the respondents. 400
questionnaires were distributed and a total of 322 questionnaires were returned (80.5
per cent). The remaining 78 questionnaires, although returned, were unusable as they
contained partial information. Data from 322 respondents would be sufficient to
ensure internal reliability of the results of a component analysis and to conduct
demographic analysis.
DATA COLLECTION
In this study the Pakistani respondents are confined to a narrow class band with a
socieconomic focus depicting the elite embryonic managerial professional class,
drawn from one of the most prestigious business institute in Pakistan. The high fees of
the institute ensure that the sample is drawn from elite families. This is in contrast
with Zain and Yasin (1997) where respondents were drawn from households in urban
areas representing a far wider socio-economic spread. Of the 322 respondents, 312
provided details of their age. In our study, the mean age of the 312 respondents was
22 years; the age range was 17 - 44. Of the 322 respondents 205 were male (63.7
percent) and 117 were female (36.3 percent). 65 respondents were from Sukkur and
245 were from Karachi. 153 respondents (47.5 percent) were undertaking Bachelor of
Business Administration (BBAs) and 169 (52.5 percent) respondents were
undertaking Master of Business Administration (MBAs). The BBA sub-grouped
represent a younger consumer group and the MBA group containing a mix of wealthy
professionals and full-time student generally older than the BBA group. The MBA
group thus represents consumers with stronger current buying power.
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RESULTS
In order to find distinctive but generic product attributes, a principle components
analysis was conducted with a varimax rotation to identify the number of component
and relevant component loadings. For a scale item to be included in a component, we
accept the need for the component loading to be greater than 0.4, as suggested by
Kline (2000a); the value of 0.4 representing an acceptable level of psychological
meaning, even though lower values may represent statistical significance.
Components were selected when the eigen-value was greater than 1.0, as
recommended by Kim and Mueller (1978). Using the above criteria, an elegant four-
component solution was located. The scale items are rearranged orthogonally in table
I and the four-component solution, containing all thirteen items, represents 57.46% of
the variance.
TABLE 1. Four Component Solution for Country-of Origin Effect
Component / Items Description Item Component MeanScoresI II III IV
I Country of origin informationRely on COO information when experience of
product is low Q11 0.680 0.144 -0.005 0.067 2.69
Rely on COO when buying a new product Q9 0.659 0.200 0.299 0.019 2.23Rely on COO when purchasing for friends or
familyQ10 0.655 0.201 0.091 0.028 2.36
Rely on COO when low risk of product malfunction Q12 0.636 -0.046 0.190 0.005 1.89
Rely on “Made in label” Q4 0.476 0.302 0.019 -0.253 2.49
II QualitySeeks on COO when high risk of product
malfunction Q6 0.116 0.766 -0.007 0.138 3.08
Seeks COO to support purchasing decision Q3 0.208 0.617 0.349 -0.078 2.78
COO information as quality indicator Q8 0.282 0.601 0.303 -0.102 2.78COO information indicates best product with the
product class Q7 0.296 0.569 0.315 -0.134 2.82
Relative importance of COO for expensivecompared with inexpensive products Q5 -0.351 0.476 -0.044 0.392 2.67
III Luxury PurchaseRely on “Made in” information for purchase of
highest quality products Q2 0.148 0.122 0.863 0.035 3.23
COO information sought for expensive products Q1 0.129 0.214 0.823 0.035 3.37
IV Inexpensive Purchase
COO sought for inexpensive product Q13 0.147 -0.020 0.065 0.901 2.31
% Explained Variance 18.18 16.43 14.43 8.42
Cumulative % Explained Variance 18.18 34.61 49.04 57.46
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We identify component I as “COO-information”, component II as “Quality”,
component III as “Luxury Purchase” and component IV as “Inexpensive Purchase”.
The following results presented in table 1 show the components identified within elite
Pakistani consumers’ perceptions of the COO effect. These components are distinctly
different, both in number and make-up, from the three components (social assurers,
security seekers and price vetters) obtained by Zain and Yasin (1997).
The highest mean score in the present study was 3.37 (see table 2) with regard to
relatively expensive items like TV, cars or refrigerator. This indicates that the elite
Pakistani consumers regard COO as important when buying an expensive product.
However, the very low score for Q12, mean = 1.89, indicates COO is less important
when purchasing inexpensive products. Low mean scores for Q5 and Q13 are also
relatively low rank with regard to the importance of COO for purchase of inexpensive
products.
Table 2 compares the mean scores of scale items in the present studies with the two
previous studies. From table 2, the highest mean score in the present study was 3.37
with regard to relatively expensive items like TV, cars or refrigerator. This indicates
that the elite Pakistani consumers regard COO as important when buying an
expensive product, this high rank for Q1 concurs with the Polish and Uzbeks studies.
However, the very low score for Q12, mean = 1.89, COO is less important when
purchasing inexpensive products. Low mean scores for Q5 and Q13 are also relatively
low rank and they concur with the responses from the Polish and Uzbeks studies with
regard to the importance of COO for purchase of inexpensive products. Apart from
the mean responses to items concerning either expensive or inexpensive products, the
ranked response profiles of the three countries are dissimilar.
Comparing the mean scores of the present study with those of the Polish and Uzbeks
studies, the Polish and Uzbeks perceived COO information more important than elite
Pakistani consumers when making purchasing decisions. There are lower mean scores
for responses from the Pakistani consumers to all the scale items. The broad Polish
and Uzbek consumers gave great importance to COO information, whereas the elite
Pakistani respondents gave relatively little importance to COO information. This
difference might predict marked contrasts in mean scores, in particular relating to the
12
Pakistani rejection of COO importance of inexpensive products, by an elite Pakistani
sample.
We considered the samples from Karachi and Sukkur to have originated from
different sub-cultures and we investigated if a different level of importance was
placed on COO by the two sub-cultures. Also, as reported by Zain and Yasin (1997),
an important issue is whether there is a difference with regard to attitudes to COO
between more educated consumers and less educate and all respondents in this study
were university students and were classified according the courses they were currently
engaged in.
Table 2: Comparative Mean ScoresQuestionnaire Items Poland* Uzbekistan+ Pakistan
When buying an expensive item such as a car, TV or refrigerator Ialways seek to find out what country the product was made in Q1 4.16 4.35 3.37
To make sure that I buy the highest quality product or brand, I lookto see what country the product was made in Q2 3.55 4.00 3.23
I feel it is important to look for country of origin information whendeciding to buy Q3 3.36 3.95 2.78
I look for the “Made in ...” labels in clothing. Q4 3.39 3.94 2.49
Seeking country of origin information is less important forinexpensive goods than for expensive goods Q5 3.61 3.91 2.67
A person should always look for country of origin information whenbuying a product that has a high risk of malfunctioning, e.g. whenbuying a watch
Q6 3.98 3.88 3.08
I look for country of origin information to choose the best productavailable in a product class
Q7 3.15 3.86 2.82
I find out a product’s country of origin to determine the quality ofthe product
Q8 3.22 3.77 2.78
When I am buying a new product, the country of origin is the firstpiece of information that I consider.
Q9 2.95 3.74 2.23
To buy a product that is acceptable to my friends and my family, Ilook for the product’s country of origin.
Q10 2.98 3.69 2.36
If I have little experience with a product, I search for the country oforigin information about the product to help me make a moreinformed decision
Q11 3.38 3.65 2.69
A person should seek country of origin information when buying aproduct with a fairly low risk of malfunctioning, e.g. when buyingshoes.
Q12 3.95 3.54 1.89
When buying a product that is less expensive, such as a shirt ,it isless important to look for country of origin
Q13 3.60 3.08 2.31*Lascu and Babbs (1995), +Zain and Yasin’s (1997)
Zain and Yasin (1997) highlighted an important issue concerning the relationship
between education level and COO effect. In this study all respondents in this study
were classified according to the level courses that they were currently engaged in
(MBA or BBA).
13
t-tests along with Levene’s test for equality of variances (Levene, 1960) were
performed on the COO dimensions with the gender, education and city variables, see
table 3. Results from the t tests and Levene’s test for equality of variances, presented
in table III, indicate that there are some significant difference between demographic
variables and COO effect, although no gender differences were found. The course
attended (MBA/BBA) did impact on component III and the total scale score, MBA
students had a mean score of 3.64 and BBA students had a mean score of 3.20 on
component III, luxury purchases.
TABLE 3: Results of t tests
Component F significance t-test significance
EducationMBA / BBA
I 0.55 0.46 1.25 0.21II 1.85 0.18 1.68 0.09
III 5.81 0.02 2.55 0.01IV 0.34 0.56 1.36 0.17
Total 0.78 0.38 2.26 0.03
Component F significance t-test significance
GenderMale / Female
I 0.26 0.61 0.66 0.51II 0.23 0.63 1.31 0.19
III 0.08 0.78 -0.33 0.74IV 0.89 0.35 -1.27 0.21
Total 1.29 0.26 0.68 0.50
DISCUSSION
The three original components social assurors, security seekers and price vetters
located by Zain and Yasin (1997) were not replicated with this elite Pakistani sample.
However, the results of the study demonstrated four main component patterns in this
elite consumer segment.
Component I indicated that consumers rely on COO information to help them make
decision especially when buying a product with which they are not familiar. This
indeed could mirror a conative component that represents the desired level of
interaction with the sourcing country.
Component II may show that consumers also use COO information to determine the
quality of the product and when purchasing a product which has high risk of
malfunctioning for instance, car, or TV. This may be a cognitive component as
14
indicated by Papadopoulos et al (1993), which represents the consumers’ beliefs about
the country’s level of technological development.
Component III is likely to indicate that COO patterns play a significant role when
purchasing an expensive or luxury item.
Component IV seems to indicate that COO information is not important when
purchasing an inexpensive product. Components II and IV possibly representing the
affective component as a sentiment connected with the country’s people.
The results indicated that there are some significant differences between demographic
variables and COO effect. With regards to the relationship of the demographic
variables to the four components identified in this elite consumer segment;
No gender differences were found.
Education level of respondents (MBA/BBA) did impact on component III and the
total scale score, MBA students had a mean score of 3.64 and BBA students had a
mean score of 3.20 on component III.
Overall it was only component III, “Luxury Purchase”, that showed significant
relationships with age and education level, this component reflects the relationship
between attitudes towards the most expensive items and the COO effect. This
component accounts for over 14% of the variance, but it appears that for the elite
Pakistani consumers COO has greatest impact on their perception of very expensive
items. The top rank allocated to Q1 (table III) confirms the importance of component
III and respondents are fairly unified in their high-ranking responses to items in the
component III sub-scale.
Furthermore, component III could separate two consumer segments: those for which
COO information is an important concept and those for which it is not. The
“Inexpensive Purchase”, component IV, on average failed to perceive the importance
of COO in relation to inexpensive goods, Q13 having a low ranking and the related
item Q12, referring to shoes, having the lowest ranking, although this item formed
part of the sub-scale for component I. Stemming from the significant relationships of
education and age with component II, the total scale score shows a significant
15
relationship with education level (table III) and with age (table II) and all four
component together represent over 57% of variance in responses. In the sample used
here age and education level are closely linked; BBA students tending to be younger
(19.9 years) than MBA students (mean age 23.8 years). COO effect is more important
for the young BBA students than the older MBA students.
IMPLICATIONS
COO effects with regards to luxurious and expensive products have important
influence on consumers’ perception and decision-making for such products. The
findings of the research demonstrate that elite consumers rely on COO information in
order to determine the quality of the products, especially when purchasing luxurious
or expensive products with high risk of malfunctioning such as a car. The results also
show that COO is more important for young elite consumers than the older
consumers. The young managerial and professional elite is the next generation of
consumers. For this reason, market can be divided into two segments, those
consumers who are sensitive to COO information and those for whom COO is not
important. Consumers, who give importance to COO information, product’s COO
may have certain meanings, which motivate them to purchase a product made in a
particular country. Those meanings are likely to be related to cognitive, affective and
conative components. Growing advance technologies, such as the internet and the
profusion of satellite television have opened the doors for foreign SMEs to reach
Pakistani consumers and exploit the economies of scope.
The study provides a better understanding of the characteristics of the demand for the
elite consumer segment and will enable marketers to design appropriate marketing
mix strategies to help target the existing and future consumers and position the
product in the Pakistani market. It will be necessary to create an appropriate
promotional mix to address these issues effectively and efficiently. Furthermore, by
finding out which countries have favourable or positive images, amongst the
consumers, SMEs from particular countries can capitalise on their favourable image
in order to gain competitive advantages more efficiently than developing a brand
image. COO could be used as a competitive tool by SMEs to differentiate the product
in international marketing. However, it remains a moot point as to which other foreign
market our results will be applicable to. The components were found to be different
16
for the elite Pakistani sample compared with Uzbekistani and Polish samples. Other
difference are likely to be found in other market due to differing buying power,
cultures, attitudes toward the product and lifestyle and these attributes will be inter-
related with COO image.
CONCLUSIONS
COO effects both consumer beliefs when purchasing a foreign product and product
evaluation after the purchase. If the product does not come up to their expectation or
consumers are not satisfied this could deter them from buying the product from that
country in the future. The SME’s therefore must deliver what they promise. For
instance, if the product is not reliable or is of poor quality, then relying only COO will
not gain a positive image amongst consumers. Then they will form a negative
perception not only of the particular product but also of the associated country. In line
with the caveat of Niss (1996) intelligence about COO image must be matched with
information about the product attribute as perceived by the target market. The
findings of this study suggest that using COO information for luxurious or expensive
products could help companies gain competitive advantages in the Pakistani market.
Additionally, in this market, quality is perceived as an attribute distinct from COO
image.
This study found that, as the perception of the luxury product is distinct from that of
an inexpensive product, social prestige is a crucial factor influencing elite Pakistani
consumers’ purchasing decisions, as well as COO image. The study suggests that the
preference for seeking for COO information is related to not only education level but
also associated with social class. SMEs could exploit differences within the market
segment since they are continuously looking to target consumers with strong buying
power. SMEs should be more aware of nuances within the segment in order to gain
favourable product positioning using COO image. Segments could be found in other
countries but it is vital to understand the target market’s socio-cultural values in order
to serve the market successfully. More accurate knowledge and understanding leads to
better market leverage and positioning. In this case, education, age and socio-
economic classification could be considered for segmentation to effectively target the
upper end of the market.
17
For instance, the study revealed Pakistani elite consumers give importance to COO
when purchasing luxury and expensive products. The study also found some
differences between younger and older consumers. It could be that younger consumer
tend to give more importance to product COO to gain in popularity or to make a
fashion statement. Furthermore, the reason older consumer gave less importance to
COO could be that they rely on more extensive previous experiences to determine the
quality of a product.
Hence, this elite market can be divided into two segments, those consumers who are
sensitive to COO information and those for whom COO is not an important factor
when making a purchasing decision. SMEs launching a product into Pakistani market
could rely on product’s COO to gain quick entry into the market. However, the
leverage is likely to weaken in the long term as consumers get familiar with the
product and purchasing decisions become influenced by other attributes such as brand
name, quality and product prestige.
The study provides a foundation from which SMEs can investigate more detailed
market intelligence with regard to their own products and potential consumers’
perceptions of those products’ attributes, in preparation for entry to their new target
market.
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